As European markets head into the close of trading, the FTSE 100 remains well off its worst levels although housebuilders, banks and airlines continue to nurse heavy losses. Chris Beauchamp, chief market analyst at IG,said:

The FTSE 100 has staged a remarkable recovery; from an open of cataclysmic proportions, the index has rallied by over 300 points. Of course the damage to individual shares has been immense, but even in some of the most heavily beaten-down names a recovery has taken place. Investors are, in theory, supposed to relish the chance to buy up their favourite shares at knock-down prices, and they got such a chance today. Only time will tell if this has been a spectacular buying opportunity, or the first act in a new and volatile bear market.

Other markets have been hit hard too, with the eurozone’s major indices taking it particularly badly. If it comes down to it, many of the UK’s biggest firms will look compelling if sterling remains weak, while a falling dollar, thanks to yet another dramatic reassessment of the outlook for Fed policy, could boost commodity prices and provide another tailwind for UK stocks. However, we have likely not seen the end of the rush to safe havens, as the UK and its erstwhile EU partners begin their prep for a long period of negotiation.

US presidential candidate Hillary Clinton has now commented on the Brexit vote, and cites the “special relationship” between the two countries. She said:

We respect the choice the people of the United Kingdom have made. Our first task has to be to make sure that the economic uncertainty created by these events does not hurt working families here in America.

We also have to make clear America’s steadfast commitment to the special relationship with Britain and the transatlantic alliance with Europe.

“This is without doubt a far more important event in that Brexit signifies a structural break in Britain’s economic and political models models, which we very much had in place since the second world war. It really does break the post-war settlement in many ways. The break in the political model is going to be more profound than the break in the economic model.”

Scotland is likely to hold a referendum within two years and he saw a “high prospect” that it will break from the UK after 300 years, while the Good Friday agreement in Northern Ireland is also at risk.

Rossi predicted a “mild recession” by Christmas– not as bad as during the financial crisis of 2009 – but one that would last until 2017. He reckons UK growth will start slowing over the summer and that the economy will fall into recession – defined as two or more consecutive quarters of contraction – in the autumn.

Turning to markets, Rossi think the $1.40 level against the dollar that sterling has held over 30 years could switch from being a floor to a ceiling. The pound dropped to $1.38 after the vote to leave.

“Sterling will work its way towards the low $1.30s in the near future over the next few weeks and months.”

Against the euro, he thinks that sterling – currently at €1.24 – will fall through €1.20.

He explained that the FTSE 100 index could actually rally if sterling continues to fall towards $1.30, as many constituents are non-sterling companies which report their revenues mainly in dollars. [Something we are already seeing]

“European stocks are reflecting some economic impact from Brexit but I don’t think eurozone will enter a recession – the UK will have the privilege of that.”

“Brexit was a black swan event and there is a potential flock of black swans flying over Europe with the political calendar,” he said – referring to upcoming elections in Spain on Sunday and Germany and France next year.

Turning to UK interest rates, Rossi does not expect rate cuts any time soon.

“I wasn’t surprised that Mark Carney didn’t cut rates today. It is going to be very difficult for him to do so with sterling weak.” [as this pushes up inflation]

“He will want to be confident that sterling has bottomed before he does so because there will be a one-time inflationary impact. That might not be until third or fourth quarter.”

“What is really important is that those Brexit forces don’t themselves fragment.. If that were all to splinter then I think the currency markets would take a very dim view. We really do need now political leadership.

“I would not be surprised at all if the first thing that the new prime minister does is call a general election.”

Back with the US, and the Securities and Exchange Commission issued this statement after Wall Street opened:

The U.S. equity markets opened normally for trading this morning. We are continuing to closely monitor the markets and have been in regular communication with financial institutions, exchanges, and market utilities, as well as our financial regulatory counterparts.

The FTSE 100 is off its worst levels following the promise from central banks to provide liquidity when necessary, says Connor Campbell, financial analyst at Spreadex:

There isn’t much to explain the FTSE’s rather remarkable recovery. A decent strand of buyers swept in when the UK index hit its earlier lows, helping to lift it back above 6200 despite a continued battering for its Barclays/RBS/Lloyds banking trio. The liquidity support promised by the Bank of England (and subsequently the ECB and Federal Reserve) appears to have been the main catalyst for the turnaround, especially given the fact that the afternoon was still littered with worrying news (namely the likelihood of a second independence referendum in Scotland).

While the FTSE rose phoenix-like from the ashes of its earlier decline, the Eurozone indices weren’t quite as lucky. The 5-6% drops by the DAX and CAC, while signalling a rebound from their respective morning nadirs, still are far worse than those seen in the UK and US (the Dow is down just over 2%), suggesting investors may not only be worried by the Brexit, but by the weekend’s Spanish election.

Even worse than the Eurozone was the pound. Sterling is still hovering around 31 year lows, at $1.37 against the dollar (dipping from $1.39 following Nicola Sturgeon’s suggestion of a 2nd Scottish referendum) and $1.24 against the euro. It is understandable that the pound has been the instrument that has struggled the most to reduce its losses, though it does have the prospect of a wave of central bank rank cuts to potentially look forward to.

More reaction to the Brexit vote from across the Atlantic, this time from Treasury secretary Jacob Lew, and another statement designed to reassure:

The people of the United Kingdom have spoken and we respect their decision. We will work closely with both London and Brussels and our international partners to ensure continued economic stability, security, and prosperity in Europe and beyond.

We continue to monitor developments in financial markets. I have been in regular contact in recent weeks with my counterparts and financial market participants in the UK, EU and globally and we are continuing to consult closely. The UK and other policymakers have the tools necessary to support financial stability, which is key to economic growth.

The vote for Brexit will not immediately affect the Republic of Ireland’s credit rating, said ratings agency S&P:

S&P Global Ratings said today that the U.K.’s vote to leave the European Union does not immediately affect the sovereign credit rating on the Republic of Ireland (A+/Stable/A-1).

We believe that the effect of an exit of the U.K. from the European Union (Brexit) on the Irish economy would likely be negative, at least in the short to medium term, but of uncertain magnitude and mixed across sectors. In terms of direct trade relationships, the U.K. accounts for only around 12.4% of Irish goods and 20% of Irish service exports, well below 50% levels observed when both countries joined the European Community in 1973.

However, the sectors that serve the U.K. market are, on average, more labor intensive and any negative shocks could damage the mending Irish labor market. Other negative economic risks associated with a Brexit could include the weakening of the U.K.’s financial service sector, with which Ireland’s financial service sector is closely linked, and the potential ripple effect stemming from lower demand from the rest of the EU.

Furthermore, many aspects of Britain’s relationship with the EU, and therefore the U.K.-Irish relationship, would be unclear, increasing uncertainties related to trade and investment between the two countries.

We do not believe the potential relocation of some U.K. businesses to Ireland would fully offset the overall negative impact of Brexit in the short to medium term.

Nevertheless, we expect the Irish economy to stay resilient enough to withstand the negative impact of the Brexit. In our view, the pace of fiscal consolidation and reduction in general government debt may slow down somewhat, but the ratings will remain supported by Ireland’s strong institutions, predictable policy making, and improving external balance sheet.